Some of most common press releases by companies focus on the success of their loyalty programs and how much their customer value them. That leads us to start thinking about how companies should be framing their loyalty programs within their businesses. Are they really stand alone programs or do they warrant greater integration into your business strategy?
The most effective loyalty programs are not standalone --- they intertwine themselves into the value selling of a company. It’s particularly important if your product (or service) is commoditized, in which case bundling in loyalty programs can create a differentiating value story that clearly distinguishing your offering from competitors.
Can Loyalty Programs Increase Brand Strength?
A lot of it depends on how you define brand strength. Is it more about image and how a brand is perceived? Or is it equally important to judge brand strength based upon the emotional connection and engagement of key audiences and promoters with respect to the brand?
It’s the latter (emotional engagement to a brand) that loyalty programs can sometimes drive. Members of highly effective loyalty programs can sometimes become highly effective brand advocates. I recall a business associate who, as an elite member of United Airlines’ loyalty program roped me into to a commitment to fly United the majority of the time. The planes were old and the service was spotty at best, but the loyalty program drove strong advocacy by elite members.
How Should This Impact Your Investment / Budgeting Towards Loyalty Programs?
We think it’s a big mistake when companies take a half-hearted approach to loyalty programs. “Go slow at first” may seem like a smart plan but it speaks to one of two problems: 1) a lack of clear business purpose for your loyalty programs OR 2) a lack of understanding of the potential impact of a well run loyalty program.
If done right, loyalty programs receive a strong budget allocation, primarily because the company understands the importance of an integrated and complete approach that includes strong marketing messaging around loyalty programs and an investment in offering real value to customers. The companies that are able to do that have the foundations of a strong loyalty effort in place:
- a strong business driver for investment in loyalty
- a clear sense of the value of key customer segments and a plan to target valuable rewards towards them specifically